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Economy in Brief

Philadelphia Fed Business Activity Index Declines
by Tom Moeller  November 15, 2012

The Philadelphia Federal Reserve Bank reported that its General Business Conditions Index retraced earlier gains. It declined to -10.7 this month after rising to an unrevised 5.7 during October. The latest was the lowest level since July. Haver Analytics constructs a seasonally adjusted figure comparable to the ISM index and it fell to 45.1. During the last ten years there has been an 85% correlation between the adjusted Philadelphia Fed index and the ISM Mfg. PMI Composite index.

Deterioration in the components during November centered on the new orders, shipments and inventory series. In addition, the employment figure improved just slightly m/m to a still negative -6.8, remaining near its lowest level of the recovery. During the last ten years there has been an 83% correlation between the employment index and the m/m change in factory sector payrolls.

Pricing power improved m/m to its highest level since February. During the last ten years there has been a 71% correlation between the prices paid index and three-month growth in the intermediate goods PPI.

The separate index of expected business conditions in six months deteriorated m/m. Employment, unfilled orders, delivery times and prices received each fell sharply.

The survey panel consists of 150 manufacturing companies in Federal Reserve District III (consisting of southeastern PA, southern NJ and Delaware.) The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Consensus expectations figure is available in AS1REPNA

Philadelphia Fed (%) Nov Oct Sep Nov'11 2011 2010 2009
ISM-Adjusted General Business Conditions 45.1 46.6 42.9 52.5 51.9 50.7 41.2
General Business Conditions -10.7 5.7 -1.9 3.1 7.7 12.1 -7.6
  New Orders -4.6 -0.6 1.0 3.5 7.1 5.5 -9.5
  Shipments -6.7 -0.2 -21.2 5.0 9.9 8.3 -7.9
  Unfilled Orders -4.6 -6.3 -8.2 -1.3 -0.9 -3.0 -15.2
  Delivery Time -13.8 -15.9 -8.4 1.7 -0.4 0.9 -15.2
  Inventories -12.5 2.1 -21.7 7.2 -0.4 -5.0 -24.0
  Number of Employees -6.8 -10.7 -7.3 10.6 11.0 4.6 -23.8
  Prices Paid 27.9 19.0 8.0 26.9 38.6 28.8 -3.6
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